According to the American Cancer Society, more than 5.6 trillion[7] cigarettes were consumed worldwide in 2002, and this figure is expected to grow to 6.3 trillion in 2010.[8] This represents relatively slow growth, notes ACS medical anthropologist and epidemiologist Dr. Omar Shafey, and the increase is fueled primarily by the growth of the world's population, not an increase in the popularity of smoking.[9] In per-capita terms, worldwide consumption of cigarettes has declined since 1986 at an average rate of about 1.2 percent annually.[10]

Concern over the popularity of tobacco products[*] and their attendant health consequences has made them a popular target for taxation around the world. Of the 152 countries from which information is available, taxes as a percentage of product price range from 80 percent down to almost 0 percent.[11]

The tax-related price differentials between tobacco products in different nations induces cross-border bootlegging and casual smuggling in much the same way it does between American states, although some scholars report that smuggling rates can also be influenced by the degree of corruption tolerated in and among nations.[12] In a widely cited paper, economists David Merriman, Ayda Yurekli and Frank J. Chaloupka estimate that 6 percent to 8.5 percent of all cigarette consumption worldwide is a result of smuggling,[13] although the figure is pegged at 10.7 percent by the Framework Convention Alliance, an international collection of groups that developed a tobacco control treaty for the World Health Organization.[14] Merriman, Yurekli and Chaloupka also estimate that in 1995, consumption of smuggled cigarettes in some nations — Cambodia, Bangladesh and Latvia, for instance — exceeded 30 percent.[15]

On Oct. 20, 2008, the Center for Public Integrity released an installment in a series entitled "Tobacco Underground: The Booming Underground Trade in Smuggled Tobacco." The installment, "Made to be Smuggled," finds that $1 billion in "Jin Ling" contraband cigarettes are flooding Europe and that the Jin Ling brand is the first brand of cigarettes designed and produced expressly for smuggling. The brand already rivals Marlboro as a favorite among contraband traffickers and their customers, according to the article.[16]

High smuggling rates are not limited to developing countries or nations with high levels of reported corruption. One 1995 study by L. Joossens and M. Raw, published in the British Medical Journal, reported that up to 85 percent of the cigarettes purchased in Luxembourg were not consumed there, suggesting massive cross-border shopping and illegal smuggling.[17] And according to Her Majesty's Revenue & Customs annual report for 2005-2006, an estimated 10 percent to 19 percent of all cigarettes consumed in the United Kingdom in fiscal 2005 were bought on the illegal market. The percentage was about 21 percent in 2000.[18]

So widespread is illicit trafficking in tobacco in the United Kingdom that even a famous soccer figure was arrested for cigarette smuggling on Sept. 2 of this year. Kostadin Hadzhiivanov, a Bulgarian who was president of the football club Belasitsa, was arrested in Greece for cigarette smuggling activities in the United Kingdom.[†], [19]

Authorities in England have noticed an uptick in the degree of smuggled rolling tobacco. It appears that a significant percentage of the population has begun substituting smuggled for legal hand-rolled cigarette tobacco, even though legal hand-rolled cigarette tobacco is typically cheaper than legal cigarettes. In a spring 2007 report, HM Revenue & Customs Department officials note that smuggled hand-rolled tobacco accounts for more than 50 percent of all hand-rolled tobacco smoked in the United Kingdom.[‡],[20]

As we discuss below, most smuggling in the United States occurs across state borders, with smugglers attempting to profit from differences in the cigarette taxes levied by each state. Some of the illicit market, however, involves cigarettes intended for export to other countries. These can be a goldmine for a smuggler because they are not subject to federal, state or local excise taxes. Over the years, schemes to divert cigarettes intended for export to illicit domestic consumption have been uncovered in Washington, California, Texas, New York and New Jersey.[21]

[10] Emmanuel G. Guindon and David Boisclair, Past, Current and Future Trends in Tobacco Use, Health, Nutrition and Population Discussion Paper, Economics of Tobacco Control Paper No. 6, (The World Bank, 2003), 9.

[*] Cigarettes accounted for more than 96 percent of the total value of tobacco products sold worldwide. See The Tobacco Atlas, Second Edition, 32.

[†] Along with the usual interdiction by law enforcement, the United Kingdom has also been attempting simple persuasion. A commercial that has run in the U.K. to discourage illicit commerce in tobacco can be viewed at http://www.youtube.com/watch?v=vfnTXlwgvtw.